In January 2022, the UK’s private schools will no longer be exempt from paying 20% VAT, and the 80% business rate discount will also be eliminated for independent schools in England and Wales that operate as charities. The question is how much it will impact the number of children attending private schools, and whether the state sector is ready to accommodate those who would otherwise attend private schools. Edinburgh has one of the highest concentrations of privately educated children in the UK, but with the new Labour government’s plan to raise taxes on private schools, there is a fierce debate about what will happen.
George Heriot’s School, often described as the inspiration for the school in Harry Potter, is one of the schools impacted by the policy. Louise Gibson has three children attending Heriot’s, and if the school passes on the full VAT rise to parents, she will have to pay an extra £700 ($952) a month. While it is unclear how many families will be affected if the cost of private schools increases, it is estimated that this VAT change will lead to a reduction in private school attendance by between 3% and 7%.
According to a 2022 report by the Institute for Fiscal Studies (IFS), 75% of children attending private schools come from the wealthiest 30% of households, with most coming from the richest 10% of households. The IFS estimates the policy will generate an additional £1.3bn to £1.5bn for the UK government. The policy will likely lead to an increase in fees paid by parents of children attending private schools, but despite rising fees and in real terms increases since 2010, private school student numbers have not diminished.
In Edinburgh, some private schools have raised their fees above the rate of inflation in recent years. The city’s most expensive schools have boarders and attract both UK and international students. While Edinburgh’s private schools have increased fees, this has not deterred many parents. Edinburgh’s state schools are in catchment areas with significant numbers of children attending private schools, and even the smallest exodus of private pupils could create a pinch point for local state schools.
The tensions surrounding VAT on private school fees are expected to lead to a legal challenge against the policy. Chancellor Rachel Reeves has said that the funds raised will go towards investing in the state education sector across the country. Despite the policy’s symbolic significance, this policy is expected to raise only 2.6% of the £57bn England schools budget, with most schools that are fee-paying having to increase their prices
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